Stocks mixed after 3-day fall

Investors pull back as they try to divine market's direction

Associated Press

Associated Press

Published 7:18 pm, Friday, December 13, 2013

FILE - In this Thursday, Dec. 12, 2013, photo, trader Richard DeViccaro works on the floor of the New York Stock Exchange. World stock markets were tentative Friday Dec. 13, 2013 as investors prepared for the U.S. Federal Reserve's decision next week on whether to reduce its monetary stimulus. (AP Photo/Richard Drew) ORG XMIT: NYBZ161

The rally that has driven stocks to record highs paused this week as investors tried to figure out where things are headed next.

Stocks were mixed on Friday and posted their second weekly loss in a row. Indexes reached record highs as recently as Monday, but then declined.

How come? Investors may be nervous that stocks are overpriced, that stock prices have grown faster than justified by profits. They may be worried about conflict with Iran, or the debate over federal spending. Some are worried the Federal Reserve will decide next week to reduce its economic stimulus, which has boosted stock prices.

Fantozzi noted that other bull markets have run for seven or eight years and peaked with higher prices compared to profits than what the market is seeing now.

The Dow Jones industrial average rose 15.93 points, or 0.1 percent, to close at 15,755.36. The Standard & Poor's 500 index fell 0.18 points, or 0.01 percent, to 1,775.32. The Nasdaq composite rose 2.57 points, or 0.06 percent, to 4,000.98.

All three indexes fell for the week despite strong employment, housing and retail spending reports.

Investors have been worried that the stronger the Fed thinks the economy is, the more likely it is to stop buying $85 billion per month in bonds.

The purchases have kept interest rates low, which makes it cheaper to borrow.

That has sent investors into stocks as they seek higher returns. The big indexes are up 20 percent or more this year.

The central bank's policymaking committee meets next week and will announce any decisions on Wednesday.

Guessing when the stimulus will end has become a parlor game for investors. They are stuck between betting that it will end soon, meaning stocks could decline, versus betting that it will continue, extending the bull market.